![]() If you were a lemonade stand owner and you went to a lemon orchard, you might think to yourself, "I will never sell enough lemonade to need all these lemons.lemons aren't scarce at all!" The factors of production are scarce, therefore, properly valuing, choosing, and allocating these in the production of goods and services is very important in Economics. Entrepreneurs are a key factor of production because they are the people who develop the products and services (or identify new ways to produce them), then identify the correct allocation of the other three factors of production (Land, Labor, and Capital) so as to successfully produce those products and services. Therefore, Capital can include things like machinery, tools, buildings, and infrastructure.Įntrepreneurship is the factor of production that is required to take risks, invest money and capital, and organize the resources required to produce goods and services. Therefore labor can include all kinds of jobs, from engineers to construction workers, to lawyers, to metal workers, and so on.Ĭapital is the factor of production that is used to physically produce goods and services, but that first has to be manufactured itself. ![]() Labor is the factor of production that can be thought of as the people who do the work required to produce something. Land is the factor of production that can be thought of as any resource that comes from the earth, such as wood, water, minerals, oil, and of course, land itself. Factors of Production and ScarcityĮconomists call an economy's resources - factors of production and classify them into four categories: Therefore, scarcity is an important fundamental economic problem because we have to think about the choices between, and allocation of these resources so that we make the best use of them. Price Determination in a Competitive MarketĮconomists use the idea of scarcity of resources to emphasize the importance of properly valuing, choosing, and allocating resources in the production of the goods and services that make an economy operate.Market Equilibrium Consumer and Producer Surplus.Determinants of Price Elasticity of Demand.Cross Price Elasticity of Demand Formula.Effects of Taxes and Subsidies on Market Structures.Monopolistic Competition in the Short Run.Monopolistic Competition in the Long Run.Behavioural Economics and Public Policy.
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